Board of Directors Competence and Market Performance in Listed Deposit Money Banks in Nigeria

Abstract

The study investigated how the board of directors’ competence affects market performance in Nigeria’s listed deposit money banks. The study specifically examined how strategic competence, measured by strategic oversight, vision, and stakeholder alignment, impacts Tobin’s Q, assessed the role of technical competence based on directors' education, financial knowledge, and professional background, and evaluated the influence of board effectiveness using meeting frequency and director shareholding on market value. This study adopted an ex-post facto design relying on existing data beyond the researcher’s manipulation. The population consisted of 13 deposit money banks listed on the Nigerian Exchange Group as of December 31, 2024, while a sample of 5 banks was purposively selected based on continuous listing and complete disclosures. Secondary data were obtained from published annual reports of the firms and NGX filings for the period 2015 to 2024, coinciding with the revision of corporate governance regulations. Data collected were analyzed using descriptive statistics and panel regression, with the Prais–Winsten regression with panel-corrected standard errors employed to correct for heteroskedasticity and autocorrelation. The findings reveal that strategic competence has a significant positive effect on market performance, showing that boards with stronger oversight, visionary capability, and stakeholder alignment enhance firm valuation. Technical competence also exerts a significant positive effect, indicating that directors’ educational, financial, and professional expertise strengthen investor confidence and firm value. Similarly, board effectiveness, measured through meeting frequency and director shareholding, significantly improves Tobin’s Q, confirming that engaged and ownership-aligned boards enhance performance. Among the control variables, firm size was found to significantly increase market performance, while leverage had a significant negative effect. The study concludes that in the Nigerian context, market performance is strongly shaped by strategic competence, technical competence, and board effectiveness. It recommends that governance policies should prioritize directors with strong strategic vision and oversight, include members with proven technical expertise, promote board effectiveness through regular meetings and director shareholding, and that regulators should emphasize competence-based appointments in updated governance codes.